Correlation Between BNK Financial and Seohee Construction

Can any of the company-specific risk be diversified away by investing in both BNK Financial and Seohee Construction at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BNK Financial and Seohee Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BNK Financial Group and Seohee Construction Co, you can compare the effects of market volatilities on BNK Financial and Seohee Construction and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BNK Financial with a short position of Seohee Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNK Financial and Seohee Construction.

Diversification Opportunities for BNK Financial and Seohee Construction

0.56

Correlation Coefficient

BNK Financial  Seohee Construction

Very weak diversification

The 3 months correlation between BNK and Seohee is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding BNK Financial Group and Seohee Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seohee Construction and BNK Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BNK Financial Group are associated (or correlated) with Seohee Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seohee Construction has no effect on the direction of BNK Financial i.e., BNK Financial and Seohee Construction go up and down completely randomly.

Pair Corralation between BNK Financial and Seohee Construction

Assuming the 90 days trading horizon BNK Financial Group is expected to under-perform the Seohee Construction. But the stock apears to be less risky and, when comparing its historical volatility, BNK Financial Group is 1.19 times less risky than Seohee Construction. The stock trades about -0.11 of its potential returns per unit of risk. The Seohee Construction Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  158,300  in Seohee Construction Co on October 11, 2024 and sell it today you would earn a total of  3,000  from holding Seohee Construction Co or generate 1.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BNK Financial Group  vs.  Seohee Construction Co

BNK Financial Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BNK Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNK Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Seohee Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seohee Construction Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Seohee Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BNK Financial and Seohee Construction

The main advantage of trading using opposite BNK Financial and Seohee Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNK Financial position performs unexpectedly, Seohee Construction can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Seohee Construction will offset losses from the drop in Seohee Construction's long position.

The idea behind BNK Financial Group and Seohee Construction Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.